The Oklahoma legislature is contemplating proposals that would move the state’s Medicaid population into managed care plans run by private insurance companies. SB 1495 would create a pilot program for privatized managed care at a to-be-determined location in Oklahoma by January 2016. HB 1552 would have moved all Medicaid patients into privatized managed care. It passed the House in 2013 and was assigned to a Senate committee, but it was not heard in the Senate before the deadline.

Why fix what isn’t broken?

For the past decade, most Medicaid patients have been served through a medical home model – known as SoonerCare Choice – that uses primary care providers to coordinate patient care while maintaining traditional fee-for-service for most other medical services. This system has been stable, effective, and innovative.

Soonercare has earned national praise. A national study of Oklahoma’s Medicaid program concluded that the Oklahoma Health Care Authority (OHCA) has “constructed a Medicaid managed care program that fits Oklahoma well.” The study wrote that the lesson for other states is that “with sufficient resources and leadership commitment, state Medicaid agencies can manage care at lower costs than managed care organizations and with similar outcomes.”

SoonerCare is efficient. Oklahoma’s Medicaid costs are well below the national average, and the per capita costs for Medicaid patients are significantly below those for patents covered by private insurance (adjusting for enrollees’ health differences). In other states, outsourced Medicaid programs have higher administrative costs – between 11 and 12 percent of total expenditures. SoonerCare’s administrative costs are just 5.5 percent.

SoonerCare is well-liked by providers. The program has expanded its network of primary care providers and specialists in both urban and rural areas and has boosted provider rates to among the highest in the nation. SoonerCare typically pays providers within two weeks of getting a clean claim, faster than many commercial insurance companies. Providers view SoonerCare as a good business partner.

SoonerCare is popular with patients. Of adult members surveyed, 90 percent were satisfied with SoonerCare customer service; 87 percent said they felt their doctor(s) communicated well, and four in five said that they could access needed care.

We’ve been down this dead end before

Managed care has a poor track record in Oklahoma. In the early 1990s, OHCA attempted to develop a statewide Medicaid managed care HMO program and found that it would be feasible only in and around the state’s three urban areas: Oklahoma City, Tulsa and Lawton. Even in those areas, the program, known as SoonerCare Plus, turned out to be less efficient and more expensive than the current SoonerCare program, while providing Oklahomans less access to needed care. Many physicians disliked the HMO model and were reluctant to sign up.

Managed care is unfeasible in rural Oklahoma. In Oklahoma’s first experiment with managed care, OHCA determined that the program would not work in the most rural areas of the state. In the few rural areas where it was implemented, some services were not available. Many rural Oklahomans had to drive to Oklahoma City or Tulsa just to see a doctor – provided they could find one accepting new patients.

Privatized managed care turned out to be less costly and less efficient than traditional SoonerCare: In 2003, the three remaining HMOs demanded an 18 percent rate increase. And OHCA analysis indicated that a similar, more flexible state-administered program could be operated “in the urban areas at one-quarter the administrative cost of the Plus program and with one-quarter of the staff.” On January 1, 2004, OHCA terminated SoonerCare Plus.

Will it be different this time?

The same fundamental problems that dogged SoonerCare Plus 1995-2004 are still in place. Oklahoma continues to have a weak HMO market. Just 6.7 percent of Oklahomans are insured through HMOs, less than one-third the national rate and the 11th lowest rate in the US.

Moving to managed care would be especially risky for the most vulnerable populations. Currently in Oklahoma, most seniors and persons with disabilities receive long-term care services through SoonerCare. Ths population tends to have very limited financial resources and to be in poor health. The state has little experience with managed long-term care. According to a 2012 study, only four states operated managed long-term care programs for the elderly and individuals with disabilities with mandatory enrollment. There is little clear evidence as to whether the model saves money or how it affects outcomes for consumers.

Medicaid managed care puts reimbursement for hospitals and physicians at risk. In 2011, Oklahoma approved the Supplemental Hospital Offset Payment Program (SHOPP), which assesses a fee paid by certain hospitals. This “state share” is then matched with federal funds and paid back to hospitals and other providers to more adequately cover the cost of care. For many rural hospitals, these supplemental payments enable them to operate in the black. SHOPP’s current supplemental payment program would terminate if the state were to enact an outsourced Medicaid program, according to the Oklahoma Hospital Association.

The Bottom Line

Under a managed care system, Medicaid programs won’t receive more funding, will have higher administrative costs, and could require more taxpayer dollars to cover their profit margins. The care of hundreds of thousands of Oklahomans, including the most vulnerable seniors and individuals with disabilities, could be turned over to an HMO system that is weakly developed in most of Oklahoma and has previously shown to be not up to the task.